Stock Market: Shareholders lose N1.2trn in 8 days.

Naira depreciates further to N300 per dollar
  
Investors in companies quoted on the nation’s stock market recorded a loss of about N1.217 trillion in eight trading days of the New Year following sell pressure that have persisted in the equities market. As at yesterday, the market capitalisation of the Nigerian Stock Exchange (NSE), which gauges the value of listed stocks, stood at N8.633 trillion as against the opening figure of N9.850 trillion recorded at the close of trading in December 31, 2015, accounting for a loss of N1.217 trillion or 12.35 per cent.
Checks by New Telegraph showed that seven out of the eight trading days witnessed losses. A further breakdown of the decline revealed that the market recorded a loss of N93 billion each on January 4 and 5. The stock market further dropped by N317 billion on January 6. It, however, became bullish on Thursday, January 7, with a gain of N30 billion, being the only day investors got respite.
The stock market reverted to a loss position with N82 billion on January 8, while it shed N233 billion on January 11, N109 billion on January 12 and N320 billion on January 13. Despite the last two days of 2015 witnessing unprecedented bullish rally with a gain of N649 billion, low sentiments in the market worsened following upset from drop in oil price, insecurity, 2015 elections and recapitalisation, among others. Financial analysts believe that some of these factors sent shock waves to both local and foreign investors and created uncertainty in the investment environment, which led to a retreat on the part of bargain hunters.
Foreign investors have continued to offload Nigerian stocks as equities fell 3.6 per cent yesterday to near a three-and-half-year low after reports that naira hit a new trough of N300 to a dollar at the black market, weighed down by sliding oil prices and the central bank’s decision to curb dollar supply to Bureau de Change (BDC) operators.
The plunge in oil price has put Nigeria’s currency under pressure and dampened appetite for assets in Africa’s biggest economy and chief oil exporter, prompting the central bank to intervene repeatedly to prop up the local currency. The fall in the price of crude oil in the international market is sending economic and political shocks around the world.
The hardest hit has been countries whose economies depend largely on oil for appreciable percentage of their foreign exchange earnings. According to experts, crude oil accounts for about 95 per cent of Nigeria’s foreign exchange receipts. The reality of possible crippling budget shortfalls also stares many oil exporting countries in the face as the priced commodity has hit its lowest price level in four years.
The Chief Executive Officer, Financial Derivatives Companies (FDC) Limited, Mr. Bismark Rewane, had said that it was likely that the current downturn in the nation’s capital market would be sustained in the near term. He said that money market rates were already at an all-time low, adding that it was expected to see a creeping up of rates as the level of government borrowing increases.
“While the increasing inflationary trends will have investors worry about their returns, the major drivers of stock market activities will be macroeconomic uncertainties and likely further increases in US interest rates. Furthermore, expected Q4 earnings will be another determinant of stock market performance. The bearish trend in the stock market is expected to continue in the near term. “Nigeria’s external reserves are below $29 billion.
The anticipated adjustment in the exchange rate band is expected to slow down the rate of depletion, as the demand pressure eases. However, with oil prices still soft at $37pb, the likelihood of an accretion is slim,” he said. According to Reuters, currency and stock markets have been hard hit by the persistent fall in crude, triggering a fall in government revenue and exit of foreign investors from the local bourse. Brent crude, which gives Nigeria around 95 per cent of its foreign earnings, fell to $30 a barrel for the first time in 12 years on Tuesday.
“With pressure on foreign reserves and oil prices at $30 per barrel, devaluation is now unavoidable. The issue will be the quantum and methodology,” said Samir Gadio, Head of Africa strategy at Standard Chartered Bank. The central bank, on Monday, stopped the sale of dollars to retail foreign exchange operators, saying that they were using up the country’s foreign reserves for illegal transactions and selling the dollar above the bank’s official rate of N197.
On Wednesday, bureaux de change traders sold dollars at a record low of between N290 to N300, citing thin liquidity. The unofficial market accounts for less than five per cent of total dollar trades in Nigeria